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It ’ s time to revise our thinking around inventory as something we actively monitor and manage , and not evidence of a crime being committed . Inventory , like insurance , is a choice about risk . Unless you don ’ t have the right tools , in which case you ’ re basically a drunk six-year-old losing someone else ’ s money in a casino . Let ’ s discuss how to avoid the embarrassment of being a drunk baby gambler .
Inventory strategy and inventory management
Techniques for modeling and optimizing inventory levels given a known set of inputs have been around for decades . But what-if tools for testing alternative inventory strategies remain inaccessible and widely underutilized to this day . A lot of this is because of the basic confusion around management and strategy or planning and design .
Company inventories for raw materials , WIP , and finished goods exist throughout the network . These inventories are tracked and managed by a variety of planning systems . To focus on finished goods , these are typically tracked and managed by an inventory management system that incorporates real-time data and allows for adjustments . However , inventory management approaches typically do NOT support what-if analysis : making adjustments , trying new deployment strategies , and then simulating the results to test out what will happen to service rates before I make those changes .
This is a classic case of selecting the right tool for the right job . Use planning applications or inventory management systems to oversee the day-to-day implementation of your strategic inventory choices . Use a proper supply chain design application to recommend changes and alter strategies as to where your stocking points are , and how to properly balance uncertainty ( risk ) with your desired service target .
Benefits of creating inventory policies with supply chain design
Supply chain design can help companies quickly get to the bottom of the overall structure and success ( or lack thereof ) of their inventory strategy . Supply chain design involves pulling together data on your supply chain ’ s configuration and operations to create a digital ‘ model ’ of the current system . With this model , you can test changes - small , medium , and big - and measure key metrics : cost , service , sustainability , risk , and more .
■ With supply chain design , you can answer inventory policy questions like these :
■ What inventory target approach properly balances service and cost ?
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